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THE ROOT CAUSES BEHIND TODAY'S HIGH UNEMPLOYMENT SITUATION, AND WHY THIS MAY NOT CHANGE ANYTIME SOON

Unemployment Rate and Non-Farm Payroll (NFP) Jobs Created

One July 8, 2011, the Bureau of Labor Statistics released the Employment Situation Report - June 2011, and reported that the US Unemployment Rate increased from 9.1% to 9.2% between May and June 2011. The June Non-Farm Payroll (NFP) payroll employment was essentially unchanged in June (+18,000).  The second half of this year is likely to show only marginal growth. The numbers were bad, but they could've been much worse.  I am no economist, but the report is more clear evidence that the economy is slowind down.  

 

Source:  Bureau of Labor Statistics

What most American's don't understand is that the Bureau of Labor Statistics measures the unemployment rate six different ways (U-1 through U-6).  The unemployment rate that is reported in the news is U-3 (total unemployed or regular unemployment rate).  However, U-3 is just the tip of the iceberg.  U-3 DOES NOT present the true unemployment rate because it does not include the following categories of workers:  

• Discouraged workers - Persons not in the labor force who want and are available for a job and who have looked for work sometime in the past 12 months (or since the end of their last job if they held one within the past 12 months), but who are not currently looking because they believe there are no jobs available or there are none for which they would qualify.
• Marginally attached workers - Persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months (or since the end of their last job if they held one within the past 12 months), but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Discouraged workers are a subset of the marginally attached.
• Employed part-time for economic reasons - Persons who work less than 35 hours per week. 

When you include the above three classes of workers into the regular unemployment rate (U-3), the result is U-6 (Total unemployed, polus all marginally attached workers, plus total employed part-time for economic reasons).  At the end of June 2011, U-6 was nearly 17.5%. This is nearly twice the regular unemployment rate of 9.2% reported by the BLS at the end of June 2011.   

Source:  Bureau of Labor Statistics

Not only has the unemployment rate remained high for a long period of time, but the average duration of unemployment is skyrocketing without any hint of slowing down.  This truly scary chart shows this quite clearly.

Source:  Bureau of Labor Statistics

The problem has become so acute, that the Obama Administration has had to extend unemployment benefits from 26 weeks to 52 weeks and now 99 weeks, coining the term "Ninety-Niner's" for those individuals out of work two years.  

According to the BLS, there are now 6.289 million workers (see graph below) who have been unemployed for more than 26 weeks and still want a job. This was up from 6.2 million in May.  This is very high, and long term unemployment is one of the defining features of this recession. 

Source:  Bureau of Labor Statistics

Percentage of Jobs Lost During The Great Recession

After the miserable Bureau of Labor Statistics Employment Situation Report - June 2011 (see above), the pace of the recovery is really starting to look dimmer.  

If you are like me, you are probably asking yourself a series of questions:

"Why does the regular unemployment rate remain so high?"

"Why do unemployed workers remain out-of-work so long?"

"Where did the jobs go?"

 "Is there any hope for the future?"

In order to answer the above questions, it is important to understand the emensity of the job situation. The chart that follows shows the job losses from the start of the Great Recession of 2007, in percentage terms - this time aligned at the start of the recession.  In terms of lost payroll jobs, the Great Recession is by far the worst since WWII.  As a percentage of the US work force, we have lost 6.6% of the total jobs.  Making things worse was the effect of the financial meltdown of September 2008 on business owners who reacted to the fear and uncertainty by laying off employees in extraordinary numbers, far greater than in past recessions.   Job losses were so deep during the Great Recession that it's no wonder the unemployment remains high.

Source:  calculatedriskblog.com

The American Recovery and Reinvestment Act of 2009 or Stimulus Plan which was enacted in early January 2009, poured $787 billion in to the economy and lifted employment by roughly 2.5 million jobs, outside analyses have found, but that has not been enough to reduce the unemployment rate substantially. Nor are there signs that business investment or consumer demand will do so soon.

Where Did All The Jobs Go?

This is a question that has haunted many economists.  There is no single reason, but it appears that job losses began to accelerate after the year 2000.   Several reasons for the incredible loss in jobs have been given, including job destruction forces from computerization (faster computers, the internet, software productivity tools and applications) and globalization (outsourcing jobs, especially NAFTA).

Outsourcing of jobs to foreign countries is one of the great hidden economic issues of recent years. It is big business, with multinational corporations actively shifting jobs out of the United States and around the globe in search of the cheapest possible labor.  But, following popular outcry against the practice in 2004, corporations have done their best to hide the details even as they expand their offshoring activities. As a result, outsourcing has by and large fallen out of the headlines.

According to a study titled, "Sending Jobs Overseas: The Cost to America’s Economy and Working Families", was co-produced by the AFL-CIO and Working America to determine the economic impact of outsourcing jobs.  Some of the findings of the study were as follows:  

• Collapse of Manufacturing Jobs - US manufacturing jobs dropped high of 19.5 million workers in June 1979 to 11.5 workers in December 2009, a drop of 8 million workers over 30 years. Between August 2000 and February 2004, manufacturing jobs were lost for a stunning 43 consecutive months—the longest such stretch since the Great Depression. During the Great Recession, which began December 2007 and ended November 2010, an estimated 2.5 million manufacturing jobs were lost.  According to the Alliance for American Manufacturing (AAM, the US lost 5.5 million jobs and at least $245 billion in manufacturing wages since the start of 2000.     
• Destruction of Manufacturing Sector - The number of manufacturing firms has declined sharply since 1999, after growing steadily earlier in the decade. The total number of manufacturing establishments of all sizes grew by nearly 26,000 between 1990 and 1998 but shrank by more than 51,000 (12.5 percent) between 1998 and 2008. An additional 5,730 establishments disappeared in 2009, bringing the total net decline to more than 57,000 since 1998.
• Jobs Outsourced Overseas Skyrocket - Since 2000, the United States has lost more than 5 million manufacturing jobs and 850,000 information sector jobs, many of which have been shipped overseas. Faulty trade and tax policies continue to lead to outsourcing as corporate executives boast record-breaking profits and salaries.
• Job Outsourcing Is Big Business - Plunkett’s Outsourcing & Offshoring Industry Almanac 2010, estimates that job outsourcing was a $500 billion global industry in 2009 that involved more than 350 prominent organizations operating in 61 distinct industry groups.
• Corporate Profits Soar - While 26.1 million Americans were unemployed, underemployed, marginally attached to the labor market or involuntarily working at part-time jobs as of Labor Day 2010, according to the Economic Policy Institute, corporate profits increased (at an annualized rate) to $1.64 trillion dollars during the second quarter of 2010.

The study determined that since 2000 the US has lost more than 5 million manufacturing jobs and 850,000 information sector jobs, many of which have been shipped overseas. Faulty trade and tax policies continue to lead to outsourcing as corporate executives boast record-breaking profits and salaries.

Manufacturing isn't the only sector hurt by outsourcing.  A 2002 study conducted by the Forrester Research concluded that 3.3 million white-collar U.S. jobs—including 500,000 information technology jobs—will shift offshore to countries by 2015 at a cost of over $136 billion in wages.

There are several arguments for and against the outsourcing of American jobs.  Corporations claim this is the only way they can compete in the global economy.  Labor and environmental experts say American manufacturer's go overseas because foreign countries have less restrictive employment and environmental laws and regulations. 

  

By the way, Working America's Job Tracker tracks the hiring, layoffs and outsourcing activities of over 400,000 American companies.  You can access the Job Tracker HERE.

However, this is not the complete answer to this job loss puzzle.

According to Barry Lynn and Phillip Longman, two research writers for the Washington Monthly, blame jobs losses not on job destruction forces, but a lack of job creation. And the engine of job creation is small businesses.  

Msrrs Lynn and Longman, propose a third job destruction force: CONSOLIDATION.  Starting in the early 80s, the Reagan administration began deregulating many industries and decided to quit enforcing antitrust laws.  Big companies began merging in earnest, and by the early 2000's it was common for three or four firms to control upwards of half or more of entire sectors.  It happened in banking, retail, transportation, pharmaceuticals, medical and health, broadcasting and automobile industries, accounting, and advertising, just to name a few. And not only do big firms innovate less than small firms, they also prevent innovative small firms from ever getting a chance to grow in the first place by hiring the smartest and the brightest, controlling channels of distribution, generating economies of scale, litigation to prevent small company innovation, and exercising monopoly power.   

The job growth of the 80s and 90s, Lynn and Longman suggest, was largely powered by companies that were founded in the 70s — companies like Apple, Microsoft, Oracle, and Genentech. By the time the 2000's rolled around, consolidation was largely complete and the pipeline of small, innovative companies was drier than it had been in decades.  The following chart shows just how rapidly we began to lose jobs during the 2000's.

To see just how widespread the job losses have been across the country, Tip Strategies, Inc, an economic development consulting firm in Austin, Texas, has designed an online animated map showing how jobs have come and gone, on a rolling 12-month from January 2004 to July 2009.  If you thought the above graphs were scary, wait till you see this one. 

[Click The Map To View An Animated Map]

The above map shows that JOBS GAINED rapidly turned into JOBS LOST beginning in the third quarter 2007, began to accelerate in 2008, and exploded after the Financial Meltdown of September 2009.  In mid-2005, Hurricane Katrina hit New Orleans with a vengence and that part of the country was immediately hit with job losses.  Job losses finally began to subside after Barack Obama came into office and enacted the Stimulus Bill in 2009.  During this tumultous period, the biggest job losses occurred in California, Arizona, Nevada, Florida, Illinois, Michigan, Georgia, New York and Pennsylvannia. 

Part-Time Workers For Economic Reasons 

From the BLS report: 

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged in June at 8.6 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of workers only able to find part time jobs (or have had their hours cut for economic reasons) increased slightly to 8.552 million in June.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 16.2% in June from 15.8% in May. This is the highest level this year (highest since December 2010).

In a blog article dated April 8, 2011, I commented on the huge number of part-time workers (see graph below) which began trending upwards in January 2002, and really began to accelerate with the beginning of the Great Recession in December 2007.  As of January 2011, the number of part-time workers is now over 9 million, continuing the trend that began in 2002.

Source:  Bureau of Labor Statistics

Recap of the NFP Data 

Note that there is no category that was not under street expectations.  Things are much worse in employment land than anyone thought.

Source:  Bureau of Labor Statistics

Labor Force Participation (LFP)

The LFP  is now at levels not seen in a decade. The LFP rate is the percentage of working-age persons in an economy who:

• Are employed.
• Are unemployed but looking for a job.

Typically "working-age persons" is defined as people between the ages of 16-64. People in those age groups who are not counted as participating in the labor force are typically students, homemakers, and persons under the age of 64 who are retired. In the United States the labor force participation rate is usually around 67-68%.

A look at the below chart confirms that as of Friday, July 8, 2011, the labor force participation hit a new record low of 64.1%.  The previous high LFP rate was 66.4% at the end of December 2006.

Source:  Bureau of Labor Statistics

A LOOK AT WHAT'S INSTORE FOR THE U.S. ECONOMY

The manufacturing sector has always been the engine for the U.S. economy, creating stable employment and good paying jobs so that America can maintain its high standard of living and maintain a strong middle class.  The loss of millions of jobs due to computerization, outsourcing and industry consolidation, may have permanently damaged the structure of the U.S. economy, resulting in continuing high rates of unemployment, lower manufacturing activity, a stagnant and unstable economy unable to create sufficient jobs, and lower GDP growth rates.  Economists have already warned of the potential for a "double dip" recession.  The fragile nature of the U.S. economy makes it especially susceptible to inflation, high interest rates, bubbles (real estate, technology, etc.), wars, natural disasters and sovereign debt problems like those in Europe.  

The following charts make these points abundantly clear.

ISM Purchasing Managers Index (PMI) 

Unemployment rates remain high becase we have become a nation of consumers not makers of things.  The graph below charts the Institute of Supply Management's (ISM) Purchasing Managers Index (PMI) which measures the economic activity in the U.S. manufacturing sector. The graph also includes several regional PMI's for different regions of the U.S. 

Economic activity in the manufacturing sector expanded in June for the 23rd consecutive month, with a PMI of 55.3%, and the overall economy grew grew for the 25th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business^®

Source:  Institute of Supply Management

The best single gauge of manufacturing comes from the ISM.  The PMI rate on June 30, 2011 was 55.3%.  A fall below 50% (PMI at the end of July 2008), which occurred just prior to the financial meltdown, would signal a contraction. Are we headed in that direction?  This chart suggests we might:

The Conference Board Leading Economic Index (LEI)

On June 17, 2011, The Conference Board released its Leading Economic Index (LEI) (see below) for the United States, and the LEI increased to 114.7 (2004=100) in May 2011, an increase of 0.4 percent, following no change in April (113.3), and a 1.4 percent rise in March (113.1).  The Conference Board Leading Economic Index is an American economic leading indicator intended to forecast future economic activity.

The LEI has been trending upwards for 26 straight months since the March 2009 when it was at 98, just three months before the Great Recession ended (June 2009 - See above GDP graph).  The US GDP managed to grow in Q3/2009 (+1.6% annualized), reversing a trend that had been in place since the start of the "Great Recession" (December 2007). Things started to accelerate in future quarters - Q4/2009 saw the economy grow at a 5% pace (annualized), while Q1/2010 clocked in at 3.7%. It seemed, for a time, that the economy was on the mend. 

Since the first quarter of 2010, the wheels have come off and the US economy is seemingly running in place.   

Bart van Ark, chief economist of The Conference Board said.

“The index points to continued, though slower, U.S. growth for the rest of this year.  The LEI for the United States has been rising since April 2009, and though its growth rate has slowed in 2010, it is well above its most recent peak in December 2006.” 

Source: The Conference Board

Source: The Conference Board

Note:  The ten components of The Conference Board Leading Economic Index^® for the U.S. include: 1) Average weekly hours, manufacturing, 2) Average weekly initial claims for unemployment insurance, 3) Manufacturers’ new orders, consumer goods and materials, 4) Index of supplier deliveries – vendor performance, 5) Manufacturers' new orders, nondefense capital goods, 6) Building permits, new private housing units, 7) Stock prices, 500 common stocks, 8) Money supply (M2), 9) Interest rate spread, 10-year Treasury bonds less federal funds, and 10) Index of consumer expectations

The Gross Domestic Product (GDP)

The United States economy grew for the 7th straight quarter, although the rate of growth was disappointing. 

The United States economy grew up 2.9 percent in 2010. Real GDP in the U.S. increased due to positive contributions from inventories, exports, consumer spending, business investment, and federal government spending. The overall contributions from these areas was offset by an increase in imports.

The economy grew by 1.8% in the first quarter of 2011, compared to a 3.1% growth the previous quarter, the United States Department of Commerce reported.  The slowdown in the growth of real GDP in the first quarter of 2011 showed that the economy is not gaining momentum, dampening prospects for a meaningful reduction in unemployment in the near future.

The Housing Crisis and Construction Industry

The US is one of the few western industrialized nations where the dream of home ownership has become a reality for many Americans.  The era of cheap money (2003 through 2005), low or no down payment mortgages, real estate speculation, and reckless lending practices of banks and mortgage companies, resulted in highly inflated real estate prices.  A real estate bubble was eminent and it hit with a vengence beginning in 2006.  

The resulting collapse of the US housing industry has resulted in levels of bank foreclosures that are unprecedented since the Great Depression.  The result was a catastrophic decline in real estate prices and massive buildup of unsold properties and bank REO's (properties held by banks).  In a blog article dated December 10, 2010, at the end of August 2010, the inventory of visible and "shadow inventory" (see blog article for explanation) of unsold homes totaled 6.1 million units--a two year supply.  

According to First American CoreLogic, at the end of September 2009, the proportion of U.S. homeowners who owed more on their mortgages than the properties were worth swelled to about 23% or 10.9 million homes (click to view interactive map by state).  Not much has changed since that time. At the end of December 2010, there were 11.1 million mortgage properties underwater. At the end of March 2011 the number declined to 10.9 million. 

Since January 2009, new housing starts are stuck at an all-time low of about 500,000 annualized units, compared to 2.250 million units in January 2006.  At the end of May 2011, new housing starts remain stuck at 500,00 annualized units, and there is no relief in sight.

By every real estate construction and construction employment economic measurement used to determine the condition of real estate construction and employment, the only bit of good news are interest rates, which for a 30-year fixed mortgage have remained under 5.50% over the last two years.  The interest rate for a 30-year fixed mortgage in California as of today is 4.75%.

The collapse of the US housing industry has devastated the construction industry employment. The unemployment rate for experienced workers in construction was 24.7 percent in January 2010.  Total construction payroll employment has dropped by 2.1 million jobs since 2006, with residential construction down by 1.3 million, or 38 percent.  The following charts put things into perspective:

Conclusion

If you are unemployed, I know this has been painful to read, as it was painful for me to research and write.  If you are lucky to be employed, this material should give you a lot to think about.  65% of American's live paycheck-to-paycheck.  Having said this, it is my honest opinion that today's unemployment situation is structural in nature due to the three job destruction forces mentioned previously, a shift from full-time to part-time workers, a lack of sufficient job creation businesses, and practice of employer's not to hire workers's over 50 years of age, and high unemployment among minorities and college graduates.  The new Digital Economy has also played a key role in the shift from blue collar to white collar jobs.

Political infighting, the federal deficit, federal debt ceiling and state budget deficits have compounded the unemployment problem, resulting in additional layoffs among government sector workers. Solving the job problem is not going to be an easy task.  Jobs outsourced to other countries are not coming back and corporations are content to operate with less employees while relying on part-time workers and temporary workers, instead of hiring new full-time workers.    

Courtesy of an article dated July 8, 2011 appearing in Business Insider, an article dated July 8, 2011 appearing in Business Insider, an article dated July 9, 2011 appearing in Business Insider, an article dated February 23, 2010 appearing in Mother Jones, an article dated October 23, 2009 appearing in WallepPop, an article dated July 8, 2011 appearing in Calculated Risk, and an article dated May 12, 2009 appearing in Spring Life, an article dated January 20, 2011 appearing in The Market Oracle, and an announcement dated June 9, 2009 by Plunkett Research, the Alliance for American Manufacturing and the Bureau of Labor Statistics

INFOGRAPHIC: WHY IS MARRIAGE GRADUALLY DISAPPEARING AND WHY DO SO MANY OF THEM FAIL?

You'll be surprised to see who values marriage the most in modern America.

American marriages have never been more precarious. But why do marriages fall apart, and how are families changing as a result?

The following infographic, by Tiffany Farrant and PromotionalCodes.org.uk, casts a piercing eye on the institution. Based on the annual report by The National Marriage Project, it paints a picture of marriage becoming a less and less relevant factor in the way American's live and raise children. The short version: Marriage is simply shrinking as a cultural value; where 66% of women over 15 were married in 1960, the figure has shrunk every decade since.* Now, it's just 51%:

But perhaps the most surprising fact is who is getting married -- and staying married. Conservative pundits will gleefully tell you that the educated elite are busy destroying every last thing that America holds dear, with family values being at the top of the list. (At the same time, when Levi Johnston first promised to marry Bristol Palin, this was held as some sort of ideal. How'd that work out?) But the fact is that being educated, making more money, waiting on kids, getting married late, and being religious are the most reliable indicators that your marriage will last.

Now, to say that marriage is disappearing isn't to say that people are opting to remain single. Rather, it appears that couples are living together in presumably monogamous relationships without getting married at all, while child rearing has become more and more disconnected from the institution of marriage.

*You might think that one very small reason is the fact that the legal age of marriage has changed over time, but the researchers have controlled for this using statistical methods.

COMMENTARY:    I have known about this for sometime when I spoke with a wedding planner, and she told me that her business was down about half.   The subject of marriages came up and she revealed that marriages were down about 25%, which correlates with decline in the institution of marriage.

I am not the best person to give marriage advice, but I believe that there are several reason's marriage is on the decline:  

1. Dramatic generational changes that have occurred since the 1960's. Women work, have careers, and are more self-sustaining, and not dependent on their husband in the event of a divorce.  
2. Co-habitation is in.  It's the best way to "test the waters", and determine if your partner is someone you want to spend your life with.   50% of marriages fail within five years. That's not a very good batting average, no wonder couples prefer not to marry.
3. Open and casual relationships are much more common, with partner's ending a relationship at the drop of a hat.  Males and females alike often have several casual partners either for dating or sex.

On December 4, 2010, I would like to share with you a blog post titled, "THE LOVER'S GUIDE TO WHEN, HOW AND THE METHODS USED BY COUPLES TO BREAK-UP", which I found very amusing. 

Courtesy of an article dated January 18, 2011 appearing in Fast Company Design

HOW CHINA'S ECONOMIC POWER AND WORLDWIDE CHECKBOOK DIPLOMACY CAN CONTROL THE U.S. FOR DECADES

We hear incessantly about the rise of China. So much so that it's all a bit too abstract: What does it mean that China's has become a global force? And more importantly, how have they actually accomplished that?

The quick answer? Through business dealings rather than military alliances, and a superb infographic from the Heritage Foundationoffers a rarely seen snapshot of that.

I say rarely seen because The Heritage Foundation boasts that it possesses the only database of China's global investments, and they've actually made it available for public consumption. The charts elegantly show the various sectors that China is investing in around the globe, and where they're doing it. The most obvious thing that's happening: China is using partners from around the world to secure the raw materials it needs to grow. It's investments abroad aren't in technology or industry; they're in metals and energy and power.

Here are their investments around the world in energy:

Click To View Interactive Map

And in metals:

Click To View Interactive Map

The more you look at this chart, the more you start seeing powerful forces at work. For one, you'll notice that majority of China's trading partners aren't in Europe or America: They're in Asia and Africa and South America. In other words, precisely those countries which have always spoken last on the world stage. China is using its economic relationships to create an alternative bloc of power, which can directly compete with the political might of the E.U. and America.

You could call it checkbook diplomacy, and it's vastly different than the bedrock of our own diplomatic efforts. Granted, the U.S. does use its economic relationships abroad as a carrot, but the stick has always been our armed forces. China, by contrast, isn't exactly threatening countries overseas with potential military action (with the exception of Taiwan, of course). Instead, it's doing hundreds of billions in business with countries that are usually also-rans on the global stage. Look, for instance at its dealings with little old Australia:

Click To View Interactive Map

The one country that China is pointedly not investing much in is America. Instead, the only thing they're doing is buying our debt and holding our currency. Here are their investments in the States:

Click To View Interactive Map

And here is a look at what currencies draw their attention; it's almost exclusively our own:

Click To View Interactive Map

This is profoundly clever stuff. China has neutralized our power to oppose it by holding so much of our debt. And it has simultaneously drawn other countries closer to its bloc of power by offering them a taste of its rocketing economy.

COMMENTARY:   I can remember as a kid reading about China's famines.  The U.S. would even send them bags of rice.  Look at them now.  Without our humongous military might, what is the United States, really?  China has eaten away at us by essentially "buying" other countries and copying everything we make.   China presents a huge bloc of votes in the U.N. not just in the Security Council.   We need to stop buying their junk, and bring back those jobs.  But wait, how could we supply Apple evangelists with their magical devices?  Forget I said that.   

Courtesy of an article dated October 19, 2011 appearing in Fast Company Design 

 

 

THE BUSINESS OF COUNTER-TERRORISM AND THE ELITE SEAL TEAM SIX, THE SECRET FIGHTING GROUP THAT GOT OSAMA BIN LADEN

 

WASHINGTON—The Obama administration has been secretly building up its ranks of hunter-killer commandos, such as the Navy SEAL team that killed Osama bin Laden.

Since 2009, the U.S. has boosted the number of strike teams in Afghanistan from four to 20, each with 10 to 100 men. These and other special-operations forces have carried out thousands of raids in the past year, officials said, killing about 3,200 insurgents and capturing approximately 8,000 more.

A senior U.S. official said stepped-up raids in Afghanistan honed the teams' skills, increased intelligence about militants in Pakistan and gave President Barack Obama confidence that a SEAL assault on bin Laden's compound in the Pakistani town of Abbottabad could succeed.

The raid on the bin Laden compound has raised the curtain on this and a host of other secret military capabilities, including the possible existence of new stealth helicopter technology and commando teams' use of trained dogs. Although the military jealously guards such details, the chance to take out the al Qaeda leader appeared worth the trade-off of revealing some of the commando teams' tradecraft.

Few have publicly criticized the use of hunter-killer commandos in the wake of the SEAL team's successful strike. But in the past, some critics have expressed worry that use of the teams amounts to targeted killings and that inserting commandos in countries where the U.S. isn't at war can threaten to enmesh the U.S. in bigger, more costly conflicts.

Hunting al Qaeda fighters and gathering intelligence on bin Laden was a prime justification for the buildup of commando units in Afghanistan. But their mission isn't likely to end with bin Laden's death. Officials say the Pentagon intends to further bolster the teams and increase the number of missions they are assigned to carry out.

Says a U.S. official,

"They are building their target lists and stacking them up.  These guys have never been as busy as they are now."

Mr. Obama planned to travel Friday to Fort Campbell, Ky., to meet with members of the team involved in the strike on bin Laden's compound. The commandos belong to Joint Special Operations Command, the Fort Bragg, N.C.-based headquarters, usually called JSOC, which oversees the U.S. military counterterrorism missions around the world.

Since the beginning of last year, the Obama administration has embraced the hunter-killer mission with vigor.

The military distinguishes between counterinsurgency—which focuses on protecting the locals and winning their trust with government services and economic development—and what the Pentagon calls counterterrorism, which in Afghanistan is a campaign to hunt down top insurgent leaders and foreign fighters.

Some in the White House view the military's counterinsurgency mission with skepticism, worried about the huge expense of having large numbers of U.S. troops deployed overseas. By contrast, the JSOC counterterrorism teams are small, travel light and require little in the way of the heavy logistics needed to sustain conventional forces.

In Afghanistan, JSOC units are credited with weakening the Taliban over the past year with constant attacks. Those insurgents reported killed or captured in the past year by JSOC and other special-operations forces, such as Army Green Berets and Marine commandos, include some 1,500 insurgent leaders, officials say.

Although foot soldiers are easily replaced, military commanders say, eliminating midlevel commanders has helped to erode the Taliban's ability to control territory and fighters.

Still, violence levels in Afghanistan remain high, with the number of weekly attacks hitting an all-time peak last September.

Such teams have generally not ventured into Pakistan. During the George W. Bush administration, military officials proposed sending a team there to capture al Qaeda's then-No. 3, Faraj al-Libbi. Senior administration officials vetoed the plan, saying he wasn't a valuable enough target to risk angering the Pakistanis. In 2005, he was captured by Pakistani special forces working with the Central Intelligence Agency.

But in 2008, the Bush administration did approve a raid into Pakistan. In an operation code-named "Cottonmouth," a SEAL team crossed into Pakistan and grabbed a militant who later provided detailed information about al Qaeda safe houses in Pakistan's North Waziristan region, a tribal area where many militants take refuge. Officials say the Central Intelligence Agency used the information to develop targets for drone strikes.

The incursion caused a furor in Pakistan, where the government publicized and condemned the strike. Within the Bush administration, State Department officials argued that further raids could permanently damage the relationship with Pakistan. The White House ruled out future strikes.

"It got to the point that bin Laden would be the only reason to go in," the senior official said.

In the 2008 presidential campaign, then-Sen. Obama repeatedly stressed his willingness to enter Pakistan to pursue al Qaeda targets. Soon after he became president, the number of CIA missile strikes in the tribal areas of Pakistan increased.

Before this week's attack on bin Laden's compound, as far as is known publicly, Mr. Obama hadn't authorized any commando raids into Pakistan. But senior U.S. officials said the administration used the expanded number of hunter-killer teams in Afghanistan to try to pressure the Pakistanis themselves to move against militants.

In October 2010, amid new intelligence reports that militants in the tribal areas were planning an attack on America or Europe, senior U.S. officials told their Pakistani counterparts that if an attack on the U.S. or its allies were traced to Pakistan, the military would act unilaterally and send commandos to attack plotters or training camps there.

JSOC controls the Pentagon's three classified special-mission units:

• Army's 1st Special Forces Operational Detachment-Delta, known as Delta Force. 
• Navy's Naval Special Warfare Development Group, commonly called SEAL Team Six. 
• Air Force's 24th Special Tactics Squadron. Units from the Army's secretive Ranger battalions are routinely assigned to JSOC, as well.

Marine Maj Gen. Richard Mills, who just finished a tour as the commander in southwest Afghanistan, told reporters on Thursday, 

"SEAL Team Six is unique.  Those are big boys.  That particular team is your top-shelf stuff."

In public, military officials will not discuss in any detail the activities of JSOC. Its budget remains classified. Still, its commanders have risen to the most senior posts. Gen. Stanley McChrystal, who led JSOC at the height of the Iraq war, became the top commander in Afghanistan. Vice Adm. William McRaven, the current commander, has been tapped to lead Special Operations Command, which oversees all such troops.

CBS' video, "The Iron Will of Seal Team 6", provides a brief history of the U.S. Navy's SEAL Team 6 and the infamous Michael Marcinko, the founder of SEAL Team 6.  Here's another excellent video about Seal Team 6.

 

The video of President Barack Obama national TV announcement that Osama Bin Laden had been killed:

 

Osama Bin Laden's compound located in Abbottabad, Pakistan.

Click the above image to view the original Wall Street article, "U.S. boosts Ranks of Elite Fighting Forces", a video (see below) about America's growing special operations units and slide show of pictures taken by the Pakistani authorities of the inside of Osama Bin Laden's compound. WARNING:  The slideshow shows some very graphic and distrubing images.

  

Prior to 2009, Army's Delta Force primarily worked in Iraq, while SEAL Team Six was assigned to Afghanistan. But as the Iraq war wound down, and the Obama administration shifted the military's focus, Delta Force units and additional Army Green Berets were reassigned to Afghanistan.

Says a senior White House official,

"The Obama administration made Pakistan and Afghanistan its primary mission, not Iraq.  By doing that, we resourced that part of the world to go after bin Laden. Obama said we are in this because of bin Laden, we are going to go after bin Laden. And we did."

COMMENTARY:   The United States Special Operations Command (USSOCOM), formed in 1980 in response to Operation Eagle Claw, the failed mission to free the U.S. Embassy employees held hostage in Iran, is charged with overseeing the various Special Operations Commands (SOC or SOCOM) of the Army, Navy, Air Force and Marine Corp. 

The Joint Special Operations Command (JSOC) commands and controls the Special Mission Units (SMU) of  USSOCOM.

These units perform highly classified activities. So far, only three SMUs have been publicly disclosed:

• 1st Special Forces Operational Detachment - Delta Force (U.S. Army). 
• Naval Special Warfare Development Group (U.S. Navy). 
• 24th Special Tactics Squadron (U.S. Air Force).

The Intelligence Support Activity (ISA) is also under JSOC. The ISA collects specific target intelligence prior to SMU missions, and provides signals support, etc. during those missions. The ISA often operates under various cover names, the most recent one being Gray Fox.  The Army once maintained the ISA, but after the September 11 attacks, shifted direct control to Joint Special Operations Command at Fort Bragg, NC. If needed, the Army Rangers and Night Stalkers can be transferred under the JSOC command. JSOC’s primary mission is believed to be identifying and destroying terrorists and terror cells worldwide.

The Navy SEALs team that conducted this operation was the legendary Team Six, aka DevGru, or the Naval Special Warfare Development Group flown into Pakistan by helicopter teams from the 160th Special Operations Air Regiment, part of the Joint Special Operations Command.

SEAL Team 6 History

Auburn graduate Richard Marcinko is the founder of the elite special forces unit ‘SEAL Team 6′ which is today widely credited with engaging and killing the world’s most wanted terrorist, Osama Bin Laden, in his compound in Abbottabad, Pakistan.

Team Six operations are highly classified and information about the unit or its current members is typically not available to the public.  Acknowledging the unit’s existence, much less crediting it with the execution of a successful mission is an unusual step by the U.S. government.

Marcinko served two tours in Vietnam where he served with SEAL Team 2 as the officer in command of the Eighth Platoon. During the Tet offensive, Marcinko and his platoon helped rescue American nurses who were trapped in churches and hospitals at Chau Doc.  While serving in Vietnam, Marcinko won the Silver Star, four bronze stars with combat V, two Navy Commendation Medals, and the Vietnamese Cross of Gallantry with Silver Star.

 

Marcinko was promoted to Commanding Officer of SEAL Team Two after serving as Naval Attache to Cambodia in 1973.

During the Iran hostage crisis in 1979, Marckino was a member of the Joint Chiefs of Staff task force known as the Terrorist Action Team, which was charged with developing a plan to rescue American hostages.

When the plan failed the Navy decided to develop a full-time dedicated Counter-Terrorism Team.  Marcinko was given the task of designing and developing the unit.  He became the first commanding officer of the new unit which he named SEAL Team Six.  He served as its commander for three years, 1980-1983.

Marcinko has written a number of best selling novels and his autobiography.  He has written books and given lectures on management and leadership techniques.  He provides hands-on training for hostage rescue teams.  He also has served as a corporate advisor to numerous multi-national businesses.

He received a Masters in Political Science from Auburn University.

I don't think you would want to be messing with Mr. Marcinko anytime soon.

The Mission To Get Osama Bin Laden

The original plan was for the Navy's SEAL Team 6 to rappel down into Osama Bin Laden's compound in Abbottabad, Pakistan, and that’s how they practiced it in April on a replica of the compound the military constructed in the U.S. on which SEALs Team Six conducted two practice runs.

But on Sunday, May 1, one of the two ultra-secret stealth helicopters (see below) used for the raid, had an issue – they’re not sure what as of now – and conducted a soft crash landing. The chopper hit the deck – “it was a real white-knuckle moment,” a US official tells ABC News.

Another white-knuckle moment – at the end of the operation, Pakistan’s military scrambled fighter jets looking for the US helicopters. Who knows what could have happened if the Pakistani planes had reached the US helicopters -- but they didn’t.

The US team got back to Afghanistan by around 5:45 pm ET.

This operation happened, an official said, because of dogged, relentless intelligence work. For years, from detainees at Gitmo, the CIA had the nom de guerre of the courier, but they didn’t have his true name until 2007.

Intel spotted him in early 2009 – it took a while to follow him . Last August when intel found the compound the reaction was along the lines of “Oh my God who are they hiding here?” a official said, recalling definite recognition this was a significant find. Congressional leaders were briefed about the compound in December.

One possible complication: While CIA contractor Ray Davis was in the Pakistani prison there were concerns about his safety were this mission to be conducted.

Davis’s March 16 release cleared that possible obstacle to the operation -- a kill mission, with the clear objective to kill bin Laden.

From Ghazi Air Base in Pakistan, the modified MH-60 helicopters made their way to the garrison suburb of Abbottabad, about 30 miles from the center of Islamabad. Aboard were Navy SEALs, flown across the border from Afghanistan, along with tactical signals, intelligence collectors, and navigators using highly classified hyperspectral imagers.

After bursts of fire over 40 minutes, 22 people were killed or captured. One of the dead was Osama bin Laden, done in by a double tap -- boom, boom -- to the left side of his face. His body was aboard the choppers that made the trip back. One had experienced mechanical failure and was destroyed by U.S. forces, military and White House officials tell National Journal.

Were it not for this high-value target (HVT), it might have been a routine mission for the specially trained and highly mythologized SEAL Team Six, officially called the Naval Special Warfare Development Group, but known even to the locals at their home base Dam Neck in Virginia as just DevGru.

This HVT was special, and the raids required practice, so they replicated the one-acre compound at Camp Alpha, a segregated section of Bagram Air Base. Trial runs were held in early April.

On April 29, President Barack Obama approved an operation to kill bin Laden. It was a mission that required surgical accuracy, even more precision than could be delivered by the government's sophisticated Predator drones. To execute it, Obama tapped a small contingent of the Navy's elite SEAL Team Six and put them under the command of CIA Director Leon Panetta, whose analysts monitored the compound from afar.

Panetta was directly in charge of the team, a U.S. official said, and his conference room was transformed into a command center.

Details of exactly how the raid unfolded remain murky. But the al-Qaida courier, his brother and one of bin Laden's sons were killed. No Americans were injured. Senior administration officials will only say that bin Laden "resisted." And then the man behind the worst terrorist attack on U.S. soil died from an American bullet to his head.

THE U.S. COUNTER-TERRORIST NETWORK

We have all heard about Delta Force, the Navy SEALS, Black Beret's and Army Rangers, but I thought I had not heard about the United States Special Operations Command (USSOCOM),  the counter-terrorist organization and its chain of command.  What I discovered is quite impressive and daunting, to say the least.  This is what the entire organization and its various branches and arms looks like:

It's a wonder that USSOCOM gets anything done.  Let's not forget that the CIA is also a silent, but very active partner of USSOCOM.  CIA Director Leon Panetta was specifically put in charge of SEAL Team 6 and the mission to get Osama Bin Laden.

President Obama's decision was probably one of the gutiest calls by any U.S. President in modern times since John F. Kennedy ordered a naval embargo against Cuba back in October 1964, that nearly plunged America into the brink of nuclear war with the Soviet Union.

Courtesy of an article dated May 6, 2011 appearing in The Wall Street Journal, an article dated May 2, 2011 appearing in the Never To Yield Foundation, and the NeoGAF forum appreciation thread dated May 2, 2011

SWISS BANKS ARE A HAVEN FOR TAX CHEATS: UBS GOT CAUGHT, HSBC FEELS THE HEAT, AND CREDIT SUISSE IS NOW UNDER INVESTIGATION

HSBC Holdings PLC is moving to mollify federal authorities investigating how the banking industry has helped U.S. clients evade taxes.

The global banking giant is cutting ties with wealthy American clients who bank offshore, as U.S. prosecutors turn up the heat on the bank to produce information about account holders who may be evading taxes, people familiar with the matter say.

A spokeswoman said the global banking giant will

"No longer offer wealth-management services to U.S. resident private clients from locations outside the U.S."

and that American clients

"Will be better served by our private banking teams in the United States."

At issue are hundreds of clients with accounts totaling as much as $100 million, said a person familiar with the situation. U.S. clients need roughly $5 million in assets to qualify for an HSBC private-client account, another person familiar with the situation said.

The extraordinary move comes as the U.S. Justice Department and Internal Revenue Service intensify crackdowns on offshore tax evasion and look beyond the world of Swiss banking for institutions that might be providing places to hide money.

HSBC is ending the practice of serving wealthy American residents from locations outside the U.S. as a way of cooperating with the U.S. and avoiding the fate of rivals that were fined or threatened with prosecution for assisting tax scofflaws, the people familiar with the matter say. The Justice Department declined to comment.

In a letter sent earlier this month to U.S. customers who have accounts with HSBC India, the bank said it is terminating "private banking services to US persons and certain trusts and non operating companies connected to US persons." Customers have 30 days to close their accounts, according to the letter.

HSBC has been under Justice Department scrutiny since earlier this year, when U.S. prosecutors alleged HSBC India had helped U.S. residents get around paying federal taxes.

HSBC's move to cut off wealthy U.S. clients represents a retreat for an institution that made a splash in the private-banking business in 1999 with the acquisition of Republic National Bank of New York. A new IRS law taking effect in 2011 requires banks with U.S. taxpayers holding offshore accounts to meet stringent and expensive new reporting requirements.

An HSBC spokeswoman said a team of advisers "will help affected clients through the transition process."

HSBC's move could put its clients in a tough spot. Brian Rowbotham, an international tax specialist in San Francisco said. 

"It presents a significant challenge for many investors and business executives, given the short notice of termination." 

The HSBC move comes amid much broader government scrutiny on tax evasion. In 2009, Swiss bank UBS AG admitted to conspiring to defraud the U.S. government of billions in taxes by helping wealthy Americans hide taxes. As part of a "deferred prosecution" agreement avoiding criminal charges, UBS turned over the names of 4,000 U.S. account holders and paid a $780 million fine for its role as part of a settlement between the U.S. and Swiss governments.

Credit Suisse Group AG said Friday that the Justice Department had notified the Swiss bank that it was a formal target of a criminal investigation into how Swiss institutions allegedly helped U.S. citizens avoid paying taxes. The bank said it was cooperating with the probe. Settlement talks between U.S. and Swiss governments aimed at resolving a wide-ranging U.S. investigation into the Swiss banking system are continuing.

In January, prosecutors indicted a New Jersey businessman on charges he conspired to evade U.S. taxes by hiding offshore accounts in India maintained by HSBC.   He pleaded guilty. And in late June, a federal grand jury indicted an HSBC client living in Wisconsin for allegedly filing false tax returns and hiding more than $8.7 million in offshore accounts. The client, a neurosurgeon and a U.S. citizen, pleaded not guilty.

The Justice Department in April asked a San Francisco federal court to let the IRS serve a "John Doe" summons on the Indian unit of HSBC seeking information about possible tax fraud "by people whose identities are unknown." The status of the summons isn't clear.

Federal authorities asked HSBC India to send letters to customers encouraging them to come forward to the IRS, and HSBC has complied with that request via a separate set of letters, said people familiar with the situation. The IRS is offering reduced but still stiff penalties for U.S. taxpayers with secret offshore accounts who voluntarily report them, but that program is to end Aug. 31. The government said it believed "many" of these clients "have hidden their accounts from the IRS."

COMMENTARY:    I love Swiss chocolates and cheese with holes it it, those beautiful Swiss Alps, the athleticism of Swiss downhill skiers, the precision of Swiss cutlery, and I thought Swiss banks represented the highest standards of ethical banking and professionalism, but I was so wrong about the latter.  It is turning out that Switzerland is a haven for tax cheats.

Foreign Bank Account Reporting (FBAR) Program 

So what's the fuss all about?  It's simply this.  The IRS is attempting to close an estimated $300 billion tax gap that has been plaguing the federal government for the past several years.  In 2009, after Barack Obama came into office, the U.S. government budgeted $20 billion to form the Foreign Bank Account Reporting (FBAR) program designed to thwart efforts by US citizens to commit income tax evasion by underreporting U.S. income and then hiding the cash related to the unreported income in undisclosed Foreign Bank Accounts.  In addition the IRS has expanded in sheer size by 40% over the last few years in response to this issue.  And boy, oh boy, the FBAR program is doing a splendid job.  

UBS

On February 18, 2009, UBS, the largest bank in Switzerloand, in a striking admission, said that from 2000 through 2007, some of its private bankers and managers had “participated in a scheme to defraud the United States” and the I.R.S. by helping American clients set up and conceal offshore accounts. 

The IRS discovered that UBS regularly sent its private bankers into the United States to solicit business from and maintain business with U.S. citizens and residents. Those UBS private bankers made thousands of client solicitations and contacts within the United States. The scheme involved falsifying or not properly obtaining or filing certain tax forms required of both the bank and its clients.  Those contacts earned UBS AG more than $100 million in fees. At the same time, that business cost the U.S. Treasury hundreds of millions of dollars in unpaid taxes. 

The bank agreed to pay the IRS $780 million to settle a sweeping federal investigation into its activities.  The U.S. Justice Department had been investigating about 19,000 UBS accounts, but the New York Times reported that the bank may only release a couple hundred names.

The IRS later asked a federal judge to demand that UBS turn over the names of around 52,000 clients. UBS "vigorously challenged" the new request.  Justice Department prosecutors suspected that from late 2002 to 2007, UBS helped American clients illegally hide $20 billion, letting them evade $300 million a year in taxes.  In July 2009,  UBS finally agreed to turn over the names of 52,000 U.S. citizens with accounts at UBS.  According to the IRS, those accounts had a cumulative value of $14.8 billion.

HSBC: How It All Came Down

In August 2010, HSBC, Europe's biggest bank,  reported that data on up to 24,000 Swiss client accounts had been stolen by a former employee and ended up in the hands of authorities in France, where the ex-worker fled.  U.S. authorities supposedly negotiated with the French through a treaty request to get the names of any U.S. HSBC clients involved.  

At that time, Linda J. Osuna, an IRS Special Agent in Charge of the Tampa Field Office, told reporters that the U.S. was building a case against an unnamed foreign bank (HSBC), which she declined to name, for "the same behavior that got UBS in trouble."  

HSBC, in an apparent attempt to avoid deeper Justice Department investigation, criminal charges and fines similar to those suffered by UBS, has given in to U.S. pressure.  However, the names of U.S. citizens whose HSBC bank accounts will be closed have not been provided to U.S. authorites. And, from appearances, HSBC gets away scott free.  

So the question remains, how many of those HSBC customers will step forward and finally comply with FBAR reporting requirements before the November 1, 2011 amnesty deadline, and put themselves at the mercy of the IRS for any wrong doing.  And, how many of those scoundrels will simply take their money and deposit it into another scruplous bank in Europe or flee to another foreign country.

Credit Suisse Now Under Investigation

I thought I was through writing about IRS investigations of these Swiss banks, but as luck would have it, noooo it's not.  I just discovered that on July 14, 2011, Credit Suisse received a letter from the IRS and is the target of an investigation in to FBAR violations.  In case you are counting, this is the third major Swiss bank under investigation by the IRS.  

A target letter is a big deal.  It probably means that a considerable level of investigation has already been done and further criminal investigation is warranted.

Credit Suisse is unlikely to be the only institution in the IRS’s sights.  It has been reported that U.S. authorities are conducting a broader industry inquiry.  Credit Suisse points out that it has obligations under Swiss law, and those are not small.  Credit Suisse says it will continue to cooperate with the U.S. authorities, subject to those rules.

IRS Penalties If Found Guilty of Violating FBAR Regulations

The IRS has given FBAR violators amnesty against criminal prosecution through November 1, 2011, in otherwords you could avoid prison time.  So what exactly happens to a U.S. citizen found to be in violation of FBAR reporting violation?   I went to a lot of trouble to find this out, and it depends if you voluntarily turn yourself in and admit to having an illegal foreign bank account or are later discovered to be a FBAR violator after the amnesty date expires.

Even with amnesty, the amounts owing are still quite painful. In a Frequently Asked Questions released by the IRS on May 6, 2009, the IRS provides the following example based on a $1 million unreported foreign account balance and $300,000 of unreported interest covering five years:

Voluntarily Disclosure Under Amnesty

If the taxpayer comes forward and has their voluntary disclosure accepted by the IRS, they …would pay $386,000 plus interest. This includes:

• Tax of $105,000 [assumes a 35% tax bracket] plus interest.
• An accuracy-related penalty of $21,000 (i.e., $105,000 x 20%). 
• An additional penalty, in lieu of the FBAR and other potential penalties that may apply, of $260,000 (i.e., $1,300,000 x 20%).

In short, the taxpayer under amnesty pays the U.S. 129% of the total income that was earned. However, this is mild when compared to what the government explains will be demanded without amnesty and $300,000 of total unreported income. In short, the amounts owing will almost two times the entire account balance and accumulated unreported income:   

Disclosure After Amnesty Period Expires

If the taxpayer didn’t come forward and the IRS discovered their offshore activities, they face up to $2,306,000 in tax, accuracy-related penalty, and FBAR penalty. The taxpayer would also be liable for interest and possibly additional penalties, and an examination could lead to criminal prosecution.

The civil liabilities potentially include:

• The tax and accuracy-related penalty, plus interest, as described above. 
• FBAR penalties totaling up to $2,175,000 for willful failures to file complete and correct FBARs (2003- $100,000, 2004 - $100,000, 2005 - $100,000, 2006 - $600,000, 2007 - $625,000 and 2008 - $650,000).
• The potential of having the fraud penalty (75 percent) apply.
• The potential of substantial additional information return penalties if the foreign account or assets is held through a foreign entity such as a trust or corporation and required information returns were not filed.

Note that if the foreign activity started more than six years ago, the IRS may also have the right to examine additional years.

If these monetary amounts were not enough, here is the IRS description of the criminal charges without the amnesty program:

Possible criminal charges related to tax returns include:

• Tax evasion (26 U.S.C. § 7201), 
• Filing a false return (26 U.S.C. § 7206(1)). 
• Failure to file an income tax return (26 U.S.C. § 7203) 
• The failure to file an FBAR and the filing of a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322.

A person convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000. A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.

Ugly isn't it?!!

FBAR Violators Renouncing U.S. Citizenship

I can't believe the extent well educated, intelligent and professional U.S. citizens (okay, they are crooked U.S. citizens) will go to hide their money earned overseas in foreign bank accounts.  In fact, some of these punkasses have gone as far as to renunciate their U.S. citizenship in order to avoid filing the required Report of Foreign Bank and Financial Accounts (FBAR) report and avoid prosecution.   Now that's what I called dedication to crime.  According to the IRS, 1,534 Americans renounced their U.S. citizenship.

Keep in mind that the FBAR is just getting started. It has taken about a year to hire and train investigators, setup the organization, gather evidence and conduct investigations, and targeted banks have not exactly been very cooperative, so it is just recently that the full extent of FBAR violations are beginning to surface.  

UBS, HSBC and Credit Suisse are not small banks. According to Global Finance Magazine's "World's 50 Biggest Banks" for 2010, ranked according to assets, HSBC is #3 ($2.364 trillion), UBS is #20 ($1.301 trillion), and Credit Suisse is #27 ($1.001 trillion).  

I look forward to reporting on the developments concerning the IRS's investigation of Credit Suisse, the newest member of the Swiss tax cheat banks.  

Courtesy of an article dated July 20, 2011 appearing in The Wall Street Journal Business, an article dated February 18, 2009 appearing in The New York Times, an article dated July 20, 2011 appearing in Forbes, and an article appearing in HGExperts.com

 

U.S. GOES ON THE OFFENSE TO DETER CYBER ATTACKS FROM CHINA AND OTHER ENEMIES DETERMINED TO ATTACK US THROUGH CYBERSPACE

 

The military must move from defending against major cyberattacks to deterring assaults by letting enemies know the U.S. is willing to retaliate with its own virtual weapons or military force, a top general said Thursday.

The Pentagon's new strategy for threats from computer hackers primarily deals with enhancing the defense of its computer systems and those of its military contractors. But Marine Gen. James Cartwright, vice chairman of the Joint Chiefs of Staff, said that policy is just a start. He said that over the next decade the military would move beyond building better firewalls and make clear to adversaries that they will pay a price for serious cyberattacks.

Gen. Cartwright said.

"There is no penalty to attacking us now. We have to figure out a way to change that." 

Deputy Secretary of Defense William Lynn said the laws of armed conflict apply in cyberspace, implying that the U.S., in some cases, reserves the right to use real bullets and real bombs to retaliate for virtual attacks. The Wall Street Journal reported the military's conclusion in May.

At the same time, a critical part of the new strategy is to improve the defenses of the military's computer networks to ensure that cyberattackers are quickly identified and get little of benefit when they strike.

Mr. Lynn said.

"If we can minimize the impact of attacks on our operations and attribute them quickly and definitively, we may be able to change the decision calculus of an attacker." 

Cyberattacks have resulted in the theft of thousands of files from the U.S. government, allies and private industry. Each year, a volume of intellectual property exceeding the size of the Library of Congress is stolen from U.S. government and private-sector networks, the Pentagon strategy document says.

Attackers have targeted the Pentagon's most expensive weapons system, the Joint Strike Fighter (F-35), a project led by Lockheed Martin Corp.  Lockheed was the target of a more recent cyberattack, facilitated by a breach of the computer-security firm RSA, which makes tokens for secure network connections. A hacking group called AntiSec said this week it had hacked into defense contractor and consultancy Booz Allen Hamilton and stolen 90,000 military email addresses and passwords.

The document says about its information infrastructure. 

"Our reliance on cyberspace stands in stark contrast to the inadequacy of our cybersecurity. Many foreign nations are working to exploit [the Pentagon's] unclassified and classified networks, and some foreign intelligence organizations have already acquired the capacity to disrupt elements."

 

Mr. Lynn said a "foreign intelligence service" had stolen 24,000 files from a U.S. defense contractor in a March cyberattack. He provided no other details of the attack but said a weapons system may need to be at least partly redesigned as a result of the breach.

Critics said the Pentagon strategy was incomplete.

"The plan as described fails to engage on the hard issues, such as offense and attribution," or identifying who mounted an attack, said Stewart Baker, a former general counsel at the National Security Agency.

Gen. Cartwright cautioned that the U.S. wouldn't routinely strike at foreign state-sponsored hackers, either with cyberweapons or real-world weapons. At a roundtable sponsored by the Center for Media and Security, he said subsequent strategy documents will clarify how the laws of war apply to cyberspace and what policies should guide deterrence.

Gen. Cartwright said he hoped the Defense Department's cyber efforts will have moved from being 90% focused on defense to 90% focused on deterrence within a decade.

If the U.S. were attacked in a way that justified a response under the laws of armed conflict, it could react in a variety of ways. Responses could begin with diplomatic efforts, then escalate into a "kinetic" attack, with real-world weapons, Gen. Cartwright said.

Some cybersecurity specialists said the strategy was a reasonable first step. "They've identified the right problems and the right approaches to addressing them," said James Lewis, a cybersecurity specialist at the Center for Strategic and International Studies, who frequently advises the administration.

Rep. Jim Langevin, a Rhode Island Democrat who has pressed for enhanced cybersecurity, applauded the strategy, but said it leaves key questions unanswered, such as whether data theft alone—rather than cyberattack that disabled the power grid, for instance—could ever amount to an act of war.

COMMENTARY:   China needs to be taught a lesson.  I think it's time for the U.S. military to send China a dose of the Stuxnet: The Virus That Shutdown Iran's Nuclear Program.   These cyber attacks are unwarranted.  The only reason they are doing this is because they have an inferior military and their high-technology weaponry is no match for the U.S., so they are testing us just incase there is armed conflict.  It really pisses me off knowing that we trade with China, we have thousands of plants and branch offices of American companies over there, and they pull this stunt.  

Thankfully, we are well prepared for cyberattacks, and we can take it as well as give it. The two organizations entrusted with the role of defending our nation against cyber attacks is the United States Cyber Command or CYBERCOM and the National Security Agency or NSA.  

United States Cyber Command or CYBERCOM  

In a blog article dated February 7, 2011, I wrote about the United States Cyber Command or USCYBERCOM, the multi-branch military arm of the Department of Defense entrusted with protecting the U.S. against cyber attacks.  And, we really have a lot to protect, including all of our military installations, and our land, sea and air-based defense facilities throughout the world.  A successful cyberattack on any of these installations or facilities could be just as being attacked by weapons of mass destruction.   

 

The precise mission of USCYBERCOM is to plan, coordinate, integrate, synchronize, and conduct activities to: direct the operations and defense of specified Department of Defense information networks and; prepare to, and when directed, conduct full-spectrum military cyberspace operations in order to enable actions in all domains, ensure US/Allied freedom of action in cyberspace and deny the same to our adversaries.

 

National Security Agency or NSA 

In a blog article dated April 28, 2011, I wrote about the NSA, the super-secret intelligence agency that goes by the nickname, "No Such Agency".  NSA's work is limited to communications intelligence; it does not perform field or human intelligence (spying on people) activities. By law, NSA's intelligence gathering is limited to foreign communications.  NSA has the ability to spy on any individual, organization, business or government agency (foreign or domestic) and has done so 24/7, 365.   The NSA is a cryptologic intelligence agency and specializes in "signal intelligence"or code breaking.  

The NSA is directed by at least a Army lieutenant general or Navy vice-admiral.   The present Director of the NSA is U.S. Army General Keith B. Alexander.  He is also Commander, U.S. Cyber Command or CYBERCOM.    See above video.

The NSA can intercept any electronic signal, in any form, frequency or language, encrypted or non-encrypted.  They can eavesdrop on anybody, even listen to conversations through brick walls.  Yes, they even listened to Osama Bin Ladin's satellite phone conversations when he was hiding out in Tora Bora, and they could be listening to you right now.   You can bet that the NSA is watching China's every move, and knows what Chinese are up especially of they plan future cyberattacks.

The Chinese Response

Naturally China has denied any wrongdoing, but the official newspaper of the People's Liberation Army said it was Beijing that was vulnerable to attack, in a news report that surveyed the Pentagon's efforts in cyber security.

The report in the Chinese-language Liberation Army Daily concluded.

"The U.S. military is hastening to seize the commanding military heights on the Internet, and another Internet war is being pushed to a stormy peak. Their actions remind us that to protect the nation's Internet security, we must accelerate Internet defense development and accelerate steps to make a strong Internet army." 

The article was also published on the website of China's Ministry of Defense (http://www.mod.gov.cn).

Although it does not amount to an official government statement, the report in the military newspaper -- which is closely vetted to reflect official thinking -- shows how China is also focused on the issues of Internet attacks and defense.

The report said.

"Although our country has developed into an Internet great power, our Internet security defenses are still very weak. So we must accelerate development of Internet battle technology and armament. Comprehensively improve our military's ability to defend the Internet frontiers."

Earlier this month, U.S. Defense Secretary Robert Gates said Washington was seriously concerned about cyber-attacks and prepared to use force against any it considered acts of war. 

Although it does not amount to an official government statement, the report in the military newspaper -- which is closely vetted to reflect official thinking -- shows how China is also focused on the issues of Internet attacks and defense.

China's military has set up an elite Internet security task force tasked with fending off cyber attacks, state media reported May 27, denying that the initiative is intended to create a "hacker army."

The People's Liberation Army has reportedly invested tens of millions of dollars in the project, which is sure to ring alarm bells around the world among governments and businesses wary of Beijing's intentions.

The Global Times quoted China's defense ministry spokesman Geng Yansheng as telling a rare briefing this week. 

"Cyber attacks have become an international problem affecting both civilian and military areas.  China is relatively weak in cyber-security and has often been targeted. This temporary program is aimed at improving our defenses against such attacks."

 

The 30-member "Cyber Blue Team" - the core of the PLA's cyber force - has been organized under the Guangdong military command in the country's south and will carry out "cyber-warfare drills", the newspaper said.

The Cyber Blue Team  is based in Jinan, China where there are 12 Universities and a high tech zone and boast 6 million people. It’s also the headquarter of the PLA. The squad is aimed at carrying out attacks on other countries Internet.  

Li Li, a military expert at the National Defense University said,

“China’s Online Blue Army is currently at its fledging period."  

Zhang Shaozhong, a military expert from the PLA adds.

“Just like the army and air forces, the ‘online blue army'  is a historical necessity."

The reason is very simple. Teng Jianqun, a research fellow at the China Institute of International Studies, said.

“We must adapt to the new types of warfare in the information era. The ‘online blue army’ is of great strategic significance to China’s economic development and social stability.” 

The United States, Australia, Germany and other Western nations have long alleged that hackers inside China are carrying out a wide-range of cyberattacks on government and corporate computer systems worldwide.

But in a commentary, the Global Times hit out at "some foreign media" for interpreting the program as a breeding ground for a "hacker army" said. 

"China's capability is often exaggerated. Without substantiated evidence, it is often depicted by overseas media as the culprit for cyberattacks on the US and Europe. China needs to develop its strong cyber defense strength. Otherwise, it would remain at the mercy of others."

China's military has received annual double-digit increases in its budget over much of the last two decades as it tries to develop a more modern force capable of winning increasingly high-tech wars.

In 2007, the Pentagon raised concerns about a successful Chinese ballistic missile test strike on a satellite. That weapon could be used to knock out the high-tech communications of its enemies.

U.S. computer firm McAfee said in February that hackers from China have also infiltrated the computer networks of global oil companies and stole financial documents on bidding plans and other confidential information.

According to US diplomatic cables obtained and published by WikiLeaks, the United States believes that China's leadership has directed hacking campaigns against U.S. Internet giant Google and Western governments.

In one cable, the U.S. Embassy in Beijing said it learned from "a Chinese contact" that the Politburo had led years of hacking into computers of the United States, its allies and Tibet's exiled spiritual leader, the Dalai Lama. 

Chinese Hacking Groups

The Chinese were ahead of the game in connecting not only with the People’s Liberation Army, but also the nascent hacker communities in their country. Using a combination of leveraging companies like Huawei to tap into their technical staff and the patriotism on the part of the PLA and the hacker communities, China has forged a solid directorate for electronic warfare and espionage.

• The Chinese Military (PLA) —–> Leverage many corporations that the military actually has majority stock in to gain access to technology and assets.
• The Chinese Hacker Community —-> Sell and work for the PLA creating 0day and performing hacks for money as well as patriotism.  (NOTE: See the video below)
• Chinese Corporations —-> Often used as cutouts to gain access economically and intelligence wise to assets in other countries

Often, the corporations, which are many times, sponsored or majority owned by the PLA are the training grounds and the operative section for soft power operations for China. By using financial deals and alliances, China often attempts to gain the upper hand by having asset connections inside of companies that they wish to affect or to steal from. No longer is it needed to install spies within when the company is partially owned or has access granted because they are working “together”

It is the Chinese hacking community that is of most interest to many in my field however. Many of these people are still in universities and are often times motivated by their nationalistic tendencies ostensibly. Some of these groups have become actual companies producing security software or offering security services.

 

Of course they are still likely to be assets for the PLA and probably the tip of the spear operators for China in operations. The reason for this simply would be that they are expendable in the sense of hacking as a nation state would cause international issues. Hacking as a hacking group though could be seen as their own initiative and they could be burned without losing face.

Within this amalgam of groups we then see the attack “teams” who crack the systems, then other teams perform recon, and still others, keep the access open and retrieve data. All in all, they have a slick operation and we would be wise to pay attention to how they operate.

Cyber warfare is not just a political and military problem between nations, but there is a huge network of individual hackers and hacking communities who hack computer systems throughout the world out of nationalistic pride because they believe the governments in those countries represent a threat to their country.  Other groups are social and political activists who are anti-corporate and anti-government, and this is their way at fighting back, creating chaos and effecting political and social change.  

To get a clearer picture at just how vast the Chinese hacking community is, I highly recommend The Dark Visitor blog.

Courtesy of an article dated July 15, 2011 appearing in The Wall Street Journal  and an article dated May 27, 2011 appearing in Defense News and an article dated July 8, 2011 appearing in the China Cyber Warfare Blog an article dated April 21, 2011 appearing in Infosec Island, and an article dated May 26, 2011 appearing in Radio86.com

 

WHERE AMERICA'S JOBS HAVE GONE, INDUSTRY LOSERS AND GAINERS, AND THE ROOT CAUSES OF UNEMPLOYMENT

There are many reasons U.S. companies give for their lack of robust hiring—from weak consumer spending to uncertainty over the direction of government policies on debt and spending.

But a closer look at hiring provides a more nuanced picture. Some industries have significantly boosted employment over the past year while others continue to shed workers. To be sure, even those adding jobs are hiring far fewer than would be needed to put America's 14.1 million unemployed back to work.

Manufacturing has been adding jobs since the start of 2010 due in large part to the sharp rebound in automobile production at General Motors Co.,  Ford Motor Co. and Chrysler LLC that has filtered to suppliers. On the flip side, just about anything to do with housing, from furniture makers to hardware stores, remains depressed. Homebuilder Toll Brothers Inc., of Horsham, Pa., plans to bring its total employment to 3,300 by Oct. 31. But that is less than half of its peak of about 7,000 in 2005.

Jon Downs, senior vice president of human resources for Toll said.   

"It's very incremental and deliberate re-hiring. We aren't in a wholesale hiring mode."

Over the past year, private employers have added 1.7 million jobs, but the net result of 659,000 cuts in government jobs—about a half of them temporary Census workers—mean total U.S. payrolls were up by only 1 million in that span. That leaves the country with 7 million fewer jobs than when the recession started in late 2007.

Here's what it looks like on the ground in some industries that are among the biggest job gainers and losers over the past year:

Restaurants and Bars

More than 9.3 million Americans work in restaurants, about one in every 10 employed, and the industry has been one of the few bright spots in an otherwise bleak hiring environment. Food service has added nearly 216,000 jobs since December 2009, when the industry's employment bottomed out in the recession. The 2.1% job growth that restaurants have experienced in the year ending June from a year ago is more than twice the nation's 0.9% job growth rate.

Of course, restaurants continue to hire even as the overall economy remains dismal because the work tends to be low-paying, either minimum wage and part-time, or both. Consider McDonald's Corp.  The burger giant hired more than 62,000 people on a national hiring day in April.  Danitra Barnett, Vice President of Human Resources for McDonald's USA said.

"McDonald's and its franchisees continue to receive applications and hire thousands of people every day, whether for short-term work experience or a life-long career." 

The job growth is expected to continue: Industry estimates suggest the sector will add 1.3 million jobs in the next decade.  —Julie Jargon

Fabricated Metal

Companies that cut and shape metal for cars, airplanes and other products generally have had a rebound in jobs and orders over the past year. Robert Akers, chief operating officer of the National Tooling and Machining Association, said orders have been particularly good from aerospace and medical equipment makers. Employment is up 77,800, or six percent compared to a year ago, according to the Labor Department. Some metal-fabrication companies also are scrambling to replace baby boomers who retired during the recession. In a recent survey of association members, about 45% said their order backlogs had increased since this year's first quarter, while 20% were down.

Growing investments by oil, gas and other energy-producing companies have fueled orders at General Carbide Corp., a maker of tungsten carbide parts and tooling in Greensburg, Pa.

Mona Pappafava-Ray, president of the family-owned company, said her work force is up by about 60 people, or 40%, since 2009. But Ms. Pappafava-Ray has noticed a slowing in orders recently-she isn't sure whether it's just a summer lull or a real drop in demand. "At some point there is going to be a pullback."   —James R. Hagerty

Computer Systems

Corporate investment in new technology have produced decent job growth in key areas of the tech sector over the past year. Jobs in computer systems design, which includes professionals who design, install and program computer systems, rose by about 70,000 between June 2010 and June 2011.

In June alone, the category added almost 6,000 professional jobs, one of the largest increases of any area.

Accenture PLC, which puts together computer systems for global corporations, said it is on track to hire some 5,000 people in the U.S. this year out of 66,000 global hires.

John Campagnino, head of global recruiting for Accenture, whose fiscal year ends Aug. 31 said. 

"We are anticipating and planning for similar results next year." 

Many startups are on a hiring tear as they receive large infusions of venture capital in the latest tech boom. Foursquare, which raised $50 million in June and makes a wireless application for smartphones, said it would add 25 employees this year to its 75, mostly software engineers.           c  —Spencer E. Ante

Telecommunications

The U.S. has bled telecom jobs as cell phones have transformed the way people communicate. Americans are relying less and less on the hard-to-maintain copper lines that link homes to the national telephone network, and more on mobile phones and fiber-optic connections, which are easier to keep running.

Telecommunications employed 869,900 people in June, 28,400 fewer than a year before and about 560,000 fewer people than a decade ago, according to the Labor Department. At Verizon Communications Inc., for example, 11,900 wire line employees took buyouts in 2010—a year when its number of wired access lines dwindled to 26 million, compared to 31 million at the end of 2008.

Marc Reed, Verizon's executive vice president for human resources said. 

"There's going to be, hopefully a stabilization period where we're now back to a stable employment base that we can continue to grow. But at this point in time, there is a disconnect between the legacy of where we've been over many, many years versus the competitive realities of the marketplace." —Anton Troianovski

Printing

Printing jobs have continued to dwindle, off 4.5% from a year ago, in part because digital competition has reduced demand for newspapers, magazines and books, said Ron Davis, chief economist for Printing Industries of America, a trade group based in Pittsburgh. The business of printing labels, wrappers and packaging remains strong, he said, and direct-marketing, catalog and brochure work has been resilient.

But the printing companies that have survived tend to be very efficient and need fewer workers 

Ralph Moore, owner of Commercial Printing Co. in Raleigh, N.C., which prints office stationery, newsletters, booklets and other items. 

"Business is better but it's not back where it was."

He has kept his staff level at 22 and figures he could expand his output as much as about 25% without new workers. Using digital printers, the company now can do some jobs with one person that used to require two or three. Mr. Moore invested about $150,000 earlier this year to install a faster digital printer.  —James R. Hagerty

Construction

In building construction, slight job gains in commercial and industrial construction are being swamped by losses in residential, where foreclosures, tight credit and depressed prices have taken a toll. In June, residential and commercial building companies employed 1.2 million workers, down 15,900, or 1.3% from a year earlier, according to the Labor Department.

Brent Anderson, vice president investor relations at residential home builder Meritage Homes said.

"We're down about as skinny as we can get and are focusing all of our efforts on increasing sales and completing construction for the buyers that are out there.  It is tough to add people when our sales aren't increasing."

Meritage expects to build between 3,500 and 4,000 homes this year, down from a peak of 10,000 homes in 2006. —Kris Maher

COMMENTARY:   With full respect to the writers at The Wall Street Journal, but the above article only scratched the surface, hitting on some of the industries where job losses have been the highest, namely the construction and telecommunications industries, but it comes nowhere close to explaining the root causes behind the high unemployment rates and stagnant job growth.   

If the restaurant industry is the biggest employer of workers, this is not very uplifting. Foodservice industry jobs are minimum wage jobs, and the majority of employer's offer do not offer employee benefits like health insurance.  This is where a lot of today's unemployed college graduates and minorities seek employment.

So long as the housing industry remains anemic, unemployment in the construction industry is going remain high.  According to the Bureau of Labor Statistics (click to view unemployment rates by industry sector), as of June 30, 2011, the unemployment rate in the construction industry is 15.6%.  The rate on June 30, 2010 was 20.1%.

Another industry that was hit very hard by the recession is the leisure and hospitality industry. This includes hotels, conventions, travel and tourism.  According to the Bureau of Labor Statistics, as of June 30, 2011, the unemployment rate in the leisure and hospitality industry is 10.9%.  The rate on June 30, 2010 was 12.3%.

Two other industries with very high unemployment rates include heavy durable goods manufacturing and wholesale and retail trade.  The automobile and heavy equipment industries have been hard hit due to job outsourcing and the weak construction industry.  Wholesale and retail sectors have been hit very hard due to cutbacks by consumers and discounters. 

For a deeper understanding of what is actually going on in America's employment workforce, I highly recommend that you read my blog post dated July 10, 2o11 titled, "The Root Causes Behind Today's High Unemployment Situation, And Why This May Not Change Anytime Soon".    

Courtesy of an article dated July 12, 2011 appearing in The Wall Street Journal Business

APPLE FACES PRODUCTION DELAYS AND LAWSUITS AS IT READIES NEW IPHONE 5, WILL BE THINNER, LIGHTER WITH CURVED GLASS TOUCHSCREEN

 

Apple Inc. is getting closer to launching its next iPhone, as it works to stay ahead of competition from smartphone rivals such as Samsung Electronics Co.

Apple has ordered key components for a new iPhone it is aiming to launch by the end of September, said people familiar with the situation.

These people said the new iPhone is expected to be similar to the current iPhone 4, but thinner and lighter with an improved eight-megapixel camera.

  

Apple is said to be ordering key components for a new iPhone that's thinner, lighter and holds an improved eight-megapixel camera. But production problems may delay its launch. WSJ's Jake Lee and Yun-Hee Kim discuss.

According to unnamed sources, Apple’s iPhone 5 will include a curved glass touchscreen display, perhaps similar to that of the Google Nexus S, according to a new online report. 

According to a May 23 report, citing unnamed sources. 

“Cover glass makers are reluctant to commit investment to the purchase of glass cutting equipment due to the high capital involved.  Apple reportedly has purchased 200-300 glass cutting machines to be used by glass cutters.”

Those machines are supposedly stored at various assembly plants in anticipation of covered-glass production ramping to acceptable levels. Apple is partnering with its suppliers over manufacturing processes such as glass-cutting and lamination.

One person familiar with the matter said the new iPhone will operate on Qualcomm Inc.'s wireless chips. Apple's current iPhone 4 uses chips from a former unit of German chip maker Infineon Technologies AG that is now owned by Intel Corp. in the model available to most operators. It uses Qualcomm chips for a version for U.S. carrier Verizon Wireless.

A spokeswoman at Apple declined to comment.

Anticipation for a new iPhone—Apple's largest product by revenue—has been mounting after the Cupertino, Calif., company chose not to unveil its latest smartphone model at its annual developers' conference in early June as it has done in the past.

 
[Click To View Slideshow]

Apple at the time said a new version of its mobile operating system would be available this fall. That fueled speculation the latest iPhone would also be introduced at the same time.

A person briefed on Apple's product plans said the company initially planned to launch its next iPhone this summer as it usually does, but the device wasn't ready in time.

Two people familiar with the situation cautioned the next iPhone could be delayed further if contract manufacturer Hon Hai Precision Co., which assembles the iPhone for Apple, couldn't improve its production yield rate.

Hon Hai Chairman Terry Guo said last month that the yield rate of Apple's touch-screen devices hasn't been satisfactory and has hurt its profitability.

Mr. Gou said.

"The touch-screen devices are so thin. It's really difficult to install so many components into the iPhones and iPads.  We hope to raise the yield rate and volume in the second half, which will help improve our gross margin."

A spokesman for Hon Hai declined to comment.

The iPhone business comprised about half of the company's $24.7 billion in revenue in the quarter ended March 26. Since launching the device in 2007, Apple has sold 108.6 million iPhones.

Fiscal Yr	Q1	Q2	Q3	Q4	Total
2007			270,000	1,119,000	1,389,000
2008	2,315,000	1,703,000	717,000	6,890,000	11,625,000
2009	4,363,000	3,793,000	5,208,000	7,367,000	20,731,000
2010	8,737,000	8,752,000	8,398,000	14,102,000	39,989,000
2011	16,240,000	18,650,000			34,890,000
Fiscal Yr	Oct-Dec	Jan-Mar	Apr-Jun	Jul-Sep	108.624 Million

This table highlights key differences between models. 

Model	iPhone	iPhone 3G	iPhone 3GS	iPhone 4
Status	Discontinued	Discontinued	In Production	In Production
Display	89 mm (3.5 in) glass LCD, 3:2 aspect ratio
	480 × 320 px (HVGA) at 163 ppi			960 × 640 px at 326 ppi
Storage	4, 8, or 16 GB	8 or 16 GB	8, 16, or 32 GB	16 or 32 GB
CPU Core	620 Mhz to 412 MHz ARM 1176JZ(F)-S		833 MHz (ucd to          600 MHz) ARM             Cortex-AB	1 GHz (ucd to 800 MHz) Apple A4
Memory	128 MB DRAM		256 MB DRAM	512 MB DRAM
Connectivity	USB 2.0/dock     connector	In addition to previous: assisted GPS, includes earphones with mic	In addition to previous: voice control, digital compass, Nike+, includes earphones w/ remote and microphone	In addition to previous: 3-axis gyroscope, Dual-microphone noise supression, microSIM
Camera	2.0 MP, still images only		3.0 MP 30 fps VGA video	Rear 5.0 MP Front 0.3 MP (VGA) 30 fps 720p HD video
Materials	Aluminum, glass and black plastic	Glass, plastic, and steel; black or white (white not available for 8 GB models)		Black or white aluminosilicate glass  and stainless steel
Power	Built-in, non removable, rechargeable lithium-ion polymer battery
Released	4 and 8 GB: June 29, 2007 16 GB: Feb 5, 2008	July 11, 2008	16 and 32 GB: June 19, 2009 Black 8 GB: June 24, 2010	GSM (Black): June 24, 2010 CDMA (Black): February 10, 2011 GSM and CDMA (White)   April 28, 2011
Discont'd	4 GB: September 5, 2007 8 and 16 GB: July 11, 2008	16 GB: June 8, 2009 Black 8 GB: June 4, 2010	Black 8, 16 and 32 GB: June 24, 2010	Still in production

While the iPhone has dominated the smartphone market, competition has intensified as other manufacturers have debuted similar phones running Google Inc.'s Android mobile operating system. The rivalry has escalated of late with Korean mobile-phone maker Samsung, with which Apple has been embroiled in a legal battle. Both companies have accused the other of infringing its intellectual property.

Global Smartphone Unit Sales and Market Shares by OS - Q1 2011 versus Q1 2010

Global Smartphone Unit Sales and Market Shares by Brand - Q1 2011 versus Q1 2010

US Smartphone Market Shares by OS - April 2011

On Tuesday, Apple filed a complaint against Samsung with the U.S. International Trade Commission seeking to bar U.S. imports of Samsung smartphones and tablets after Samsung last week requested that the ITC exclude certain iPhone and iPad models from the U.S. market. 

Wall Street's projections for a new iPhone are relatively conservative because analysts don't expect the device to have the kind of major improvements and design changes that will persuade current iPhone owners to upgrade their devices early.

Still, said a person at one of Apple's suppliers.

"Apple's sales estimates of the new iPhone are quite aggressive. It told us to prepare to help the company meet its goal of 25 million units by the end of the year.  The initial production volume will be a few million units."

Investors expect a bigger boost to Apple's phone business next year. People briefed on Apple's plans said the company is planning a major iPhone revamp then, with one person saying the company has been experimenting with features such as a new way of charging the phone.

Apple has also been working on a less-expensive phone with new features such as an edge-to-edge screen, according to this person.

COMMENTARY:   In a blog article dated October 23, 2010, I profiled Foxconn International, the division of Hon Hai Precision Co. that assembles Apple's iPhones, iPods and iPads in a virtual stronhold and under extreme secrecy (a strict requirement of Apple CEO Steve Jobs).  Security is extremely high and Foxconn's security guards have been physical with repoter's and any other individuals trying to access the plant without authorization.  

When I first read this article, I was incredulous and appalled at what I have read about Foxconn's plants in China, their high security and secrecy, and the oppressive treatment of factory workers. In the twelve months prior to February 2010,  11 Foxconn International factory workers committed suicide without any explanation. 

Rumors abound of the oppressive worker conditions, 15-20 hour work days, sometimes without breaks, just so that Apple's products can be delivered on time.  Worker's have been sworn to secrecy.  The shear number of suicides defy all statistical odds.  How can so many workers from one Foxconn International plant commit suicide?  Were these factory workers killed by Foxconn International for violating secrecy or not meeting their production quota's, then the evidence covered up, and their deaths blamed as a suicide?  Makes you wonder, doesn't it?

I appeal to all Apple evangelists who home those "magical" devices to please destroy them in protest and support of Foxconn's factory workers.  Don't let Steve Jobs and his henchmen in China get away with this.  If you don't want to destroy your iPad, please donate them to a needy cause.  I will find good use for them HERE.  

Courtesy of an article dated July 7, 2011 appearing in The Wall Street Journal Technology, an article dated May 24, 2011 appearing in Webestigate and WikiPedia

CHINA HAS A POPULATION OF 1.6 BILLION, ITS INTERNET ECOSYSTEM IS HUGE, AND FORECASTED TO BE EVEN BIGGER

China's online advertising market is still maturing and is being driven by the number of internet users. China's internet users continues to grow and stood at 457.3 million (That's twice the U.S.), with a penetration of only 34.3%.  According to CIC, internet users in China as of May 2011 were now 477 million. 

The Chinese internet ecosystem is dominated by 1 to 3 companies within each internet segment:

[Click To Enlarge] 

Surprisingly the dominant language of the internet is not Chinese, but English: 

 

[Click to Enlarge]

In the US, the relentless expansion of Twitter and Facebook continues to change the entire Internet landscape. Nowadays, social media is as equally integral a part of people’s online lives as other key internet services: search engines, portals or e-commerce platforms. The extended, 3rd party applications incorporated by social media platforms help to quickly form an immersive eco-system and have aided the perpetuation of this social business revolution since 2006: Crowd sourcing, Enterprise 2.0 and Social CRM etc.

In China, the social media environment has been really heating up as traditional internet giants like Taobao, QQ, Baidu and Sina have joined the battle. We have seen the boundary between SNS and e-commerce being blurred by the emergence of some group purchase sites. We’ve also seen big platforms starting to adopt an “Open API & Platform Strategy”, based on a realization of the importance of 3rd party applications to their success.

CIC has been at the forefront of this rapid development of social media in China and based on this first-hand experience and expertise, established itself as the industry’s thought leader. From this vantage point, we could forecast the natural evolution that will eventually lead every enterprise and organization to socialize their business. That’s why CIC have been instrumental in defining the term "social business" in China. Not only that, we are dedicated to helping you gain an actionable understanding of social media and social business in China.

According to Sam Flemming, CIC Chairman and Founder.

"China has the most complex, fragmented, and developed social media landscape in the world with a unique online culture that requires its own specialized understanding,” 

[Click to Enlarge]

Social media in China is influenced by a number of different factors:

[Click to Enlarge]

 COMMENTARY:    The U.S. internet market is reaching maturity as we approach maximum penetration (65%) in the number of users.  In China, internet penetration (34%) is about half that in the U.S.   Internet competition in China is fierce.  In the U.S. there is usually a clear internet leader within each segment.  In China, there could be as many as 2 to 3.   Facebook is trying to be the first social network to penetrate the market.  The irony of all of this is that with the exception of Groupon, most U.S. internet leaders are banned in China.  

Courtesy of CIC and others

 

PIKE'S RESEARCH: CHINA CONTROLS 97% OF RARE EARTH METALS, DECREASING EXPORTS, INFLICTING ECONOMIC BLACKMAIL ON U.S. AND THE WEST

If the clean energy economy takes off, then access to rare earth metals needed for electric vehicle batteries and wind turbines is critical. And China is the primary source.

A new report, Pike Research’s “Rare Earth Metals in the Cleantech Industry,” examines some key issues related to the materials, which the Chinese appear to have a stranglehold on current world supply.

While segments of the clean energy industry object to trade practices that have led to a formal complaint before the World Trade Organization, the rare earth metals issues has gotten less attention. That may not be the case much longer, as demand for the materials is expected to skyrocket and access may be constrained.

China’s monopoly over the global rare earth metals market has come under increased international scrutiny following recent efforts on the part of the Chinese government aimed at consolidating its domestic rare earth metal industry.  Accounting for 97 percent of worldwide rare earth metal production, China’s new export quotas, introduced in July 2010, have seen prices for rare earths skyrocket, the report says.

“The short term picture for rare earth metals in the clean technology industry will be characterized by a significant supply risk brought about by China’s strict new export quotas,” says research analyst Euan Sadden.  “This will almost certainly influence the adoption and commercialization of certain technologies across the cleantech industry.  That said, there are a number of positive initiatives that offer the potential for alleviation of this risk in the longer term.”

Rare earth metals have been identified as a troubling area of potential risk for a number of prominent clean energy technologies including wind turbines, electric vehicles, fuel cells, and energy efficient lighting.

According to the Pike Research report, demand for rare earths in the cleantech industry will reach 12,920 tons per year by 2017, up from approximately 9,000 tons annually in 2011, which could place an increased strain on global supply for these emerging applications.

Rare earth metals demand will be the highest for utilization in the manufacture of nickel metal hydride (NiMH) batteries for hybrid vehicles, followed by wind turbines.  Among the eight rare earth metals covered in the study, Pike forecasts that by 2017 demand will be greatest for:  

• Yttrium - 6,088 tons annually 
• Cerium - 2,441 tons annually 
• Lanthanum - 1,867 tons annually  
• Others - The need for other rare earth metals such as neodymium, praseodymium, europium, terbium, and dysprosium will be somewhat smaller, but still significant portions of the overall mix.

Potential sources of alternative supplies do exist and markets are responding to the high price climate. Mining projects outside of China, like in Mountain pass, California, are coming online. Other companies, particularly in Japan, are exploring the viability of recycling rare earth materials and developing technologies that require less of them.

At any rate, the supply risks are real and the cleantech industry needs to find ways to respond.

COMMENTARY:  I have no doubt that China has sinister designs on controlling rare earth metals for their economic benefit, and said so much in a blog post dated February 7, 2011.  When I did the research on rare earth metals for that blog post, I could not believe what I was reading   If you haven't read that post, I highly recommend it, so that you can draw your own conclusions.  

I believe that you can only come one conclusion--economic blackmail--a deliberate attempt by China to use their control over rare earth metals as a way to inflict economic damage on America and the West.  

In the above blog post, I cited a Forbes magazine article that China has raised prices dramatically and limiting exports of rare earth metals the U.S. and the West, in order to force them to open plants in China.  It's economic blackmail. It's very similar to the way the Middle East has driven prices of oil to such heights that this cannot but hurt the American economy, just when we are showing signs of improvements.    

Courtesy of an article dated  May 26, 2011 appearing in RenewablesBiz